Select Committee on Agriculture Seventh Report


Development of the IACS system

18. The original IACS system as introduced in 1993 has been adapted to include new schemes as they are introduced, as well as to incorporate amendments to existing schemes. This has caused its own problems in increasing the complexity of the system. The Government of the Netherlands complained that "more and more aid regimes are brought into the scope of the integrated system without any attempt to link them with controls already prescribed in another community framework".[46] The changes agreed as part of the Agenda 2000 settlement have further complicated this picture, placing additional administrative burdens on both farmers and officials.[47] Fortunately, the reaction to these developments on the part of national authorities has generally been to push for simplification, moving towards a properly integrated control system; and the Commission, coming under pressure from MEPs as well as national bodies,[48] has begun to show more flexibility and a greater willingness than in the past to address the key question of simplification.

19. During the French Presidency of the EU in the second half of 2000, the French Government canvassed the other Member States on a priority list of areas for simplification which had been developed in conjunction with the UK.[49] This resulted in a commitment at the October Agriculture Council that discussions "should be taken forward rapidly" on changes outlined in a presentation by Franz Fischler, the European Commissioner responsible for agriculture.[50] Progress made since then includes the publication by the Commission of a report on the simplification of agricultural legislation in January 2001[51] and the first meeting of officials from national authorities to discuss the way forward in March 2001.[52] The overall aim is to revise Regulation 3887/92 (the detailed rules for the implementation of IACS) in time for the changes to take effect on 1 January 2002.[53]

20. The Commission's report on simplification stated that the Commission "has chosen to focus" on two aspects of the process:

  • making agricultural legislation as clear, transparent and easily accessible as possible; and
  • reducing the administrative workload that the CAP imposes on farmers and on others concerned, as well as on national and Community authorities, to only what is strictly necessary.[54]

It argues that "simplification is important both to increase the cost effectiveness of the CAP and to reduce the risk of errors and fraud", since "ambiguous and complex" rules are "difficult and costly" to implement, manage and control, creating greater scope for fraud. Understandably, the Commission also stresses "the importance of not weakening the efficiency of ... the Integrated Administration and Control System", in order to protect against increased expenditure and abuse.[55] Its proposals include an undertaking to ensure that "the objective of simplification is already fully taken into account during the decision-making process" in future, thus avoiding the need for corrective action once legislation is in place.[56] To this end, internal guidelines have been drawn up "to make sure that the new agricultural legislation is as simple and clear as possible from the outset".[57] We welcome this initiative and look forward to receiving reports on its progress. The report also makes references to individual proposals to tackle difficulties in the existing regimes. We discuss below those of most concern to British farmers.

Livestock schemes

21. The earliest significant changes resulting from the simplification programme are likely to be in the livestock schemes. A measure introduced in 2000 allows Member States with a computerised database to treat information forwarded by slaughterhouses as applications on behalf of producers, thereby removing the need for farmers to fill in their own application forms for the slaughter premium scheme. The same simplified regime could also apply to the beef special premium, additional payments and deseasonalisation premium schemes.[58] Thus in the UK, this could cover the veal calf slaughtering premium scheme, slaughter premium scheme, the suckler cow premium scheme and the beef special premium scheme. Once a competent database is in place and the national authorities are certain that the information supplied by farmers regarding births, deaths and movements of cattle is accurate, there will be nothing to stop payments being made to farmers simply on the basis of the data already held by the paying agency in each Member State. The aforementioned bovine schemes would thus become "a paperless system with no claim form".[59] MAFF envisaged that this would take two years to become a reality in the UK,[60] but officials showed real enthusiasm for pursuing the project.

22. A further benefit of the cattle database is that it could lead to a halving of the number of related inspections on farms from 10 per cent of claims to 5 per cent.[61] Moreover, while each scheme (and an individual farmer could be making applications for five different premia[62]) is currently inspected separately, a reliable database would allow national authorities to combine the inspections so that all schemes can be inspected in one visit.[63] The UK has been "instrumental in trying to develop this centralised approach to controls for livestock"[64] and we welcome a change which will have a real impact on lessening the burden on farmers. The Commission's paper on simplification refers to encouraging Member States "to introduce business-based checks, i.e. to check as many measures as possible during a single control visit".[65] While it is easier to combine inspections of livestock schemes, we believe that the business-based inspection system should also extend to all other schemes under IACS, including arable schemes. We recognise that there may be issues regarding timing of visits and that such combined inspections would necessarily be longer than those concerned with a single scheme, but we believe that this approach would be popular with farmers without adversely affecting the stringency of the controls.

Small farmers' scheme

23. Administrative burdens clearly fall proportionately more heavily on small businesses, and so the Commission has brought forward proposals to reduce the IACS burden on small farmers. The simplified scheme would entail a farmer making one single application at the beginning of a three year reference period and receiving one global payment per year, covering all the direct aids included in the scheme.[66] The original proposal is for a trial running for three years, during the last year of which the Commission would assess its effects and "make appropriate proposals".[67] At least in the trial period, the scheme would be voluntary on the part of the farmer and on the part of the individual Member States.[68]

24. The proposal is superficially attractive in its simplicity but it has met with some caution. Both Mr Slade from the Commission and MAFF officials raised questions over the handling of quotas and control issues under the scheme.[69] Moreover, the scheme requirements as currently set include a subsidy threshold of just 1,000 euros, equating to five suckler cow premium claims or approximately 40 sheep annual premium claims at 2002 subsidy levels. Very few UK farmers would meet this criteria (the NFU estimated perhaps 0.1 or 0.2 per cent, the European Commission 3.8%[70] ) which makes the scheme of little direct interest here, except in areas like the crofting counties of Scotland. Conversely, the fact that about 60 per cent of Portuguese farmers, for example, would be excused the burden of form-filling means that the scheme could be seen as disadvantageous to UK farmers.[71] There is a lot of pressure to raise the threshold to include farmers receiving more than 1,000 euros in direct aid.[72] We believe that the proposal is potentially of great interest. We recommend that MAFF support the pilot scheme and actively consider amendments which would make the scheme more appropriate to the UK, with a percentage target (say, 10 per cent) for the number of farmers meeting the criteria. We also recommend that consideration be given to introducing a euro limit which could vary for each Member State in relation to average subsidies.


25. Included in the presentation made by the Commission to the meeting of IACS officials from national authorities on 8/9 March 2001 were to be preliminary proposals for "clarification of sanctions and, if possible, streamlining of the sanctions system".[73] Objections to the present penalty system were raised with us in Ireland and France as well as in the UK, focussing mainly on its lack of flexibility or proportionality. The IACS regulations provide for progressive penalties where farmers have made inaccurate declarations of area or livestock numbers or have submitted forms after the deadline. For livestock schemes, penalties are applied where the inaccuracy is greater than five per cent of the number claimed; for area aid, the threshold is three per cent or more than two hectares.[74] However, in both cases there is a maximum allowance of 20 per cent difference beyond which no aid is paid at all. There is also a second set of penalties for breach of scheme rules, which can involve complete exclusion from the scheme or from all IACS schemes for one or two years.[75] Although there are guidelines for the treatment of obvious errors and provision for a defence of force majeure, the rules are too rigorous to allow national authorities to exercise either appropriate discretion or flexibility, with the result that there are plenty of hard cases where what appear to be genuine errors have resulted in disproportionately harsh penalties.

26. There is clearly a role here for the national authority and all parties concerned to ensure that the error rate is reduced to the bare minimum, but it is equally the case that this is an issue which needs to be addressed at EU level, since it is a common complaint throughout Member States and only agreement on a new fairer regime to operate everywhere would remove suspicion that some farmers are receiving more favourable or less favourable treatment from their national authorities in applying sanctions. In the UK there is the additional anxiety that unless flexibility is built in by the Commission, then MAFF officials will continue to operate to the very letter of the law because of the fear of disallowance.[76] The suggestions put forward by MAFF include increasing the threshold for penalties on area aid discrepancies to five per cent, in line with penalties for livestock schemes (as suggested by the IACS and Inspections Working Group), and introducing a time limit on the backdating of penalties where errors have been made over a period of years.[77] A third issue which needs addressing is the understandable resentment among farmers that the system "claws back money from farmers who have over-claimed, but does not compensate them if it is found out that they have under-claimed."[78]

27. MAFF officials expressed doubt over the Commission's commitment to simplification of the penalty regime[79] and Mr Slade himself stressed that "that is not such an easy thing to do" because of the need to enforce and audit the system.[80] However, he also pointed out that he had "no interest in making sanctions so swingeing that they will never be applied ... I have an interest in making sanctions fair and proportionate and for the inspectors to understand that they are fair and should be applied to improve the system overall for everyone."[81] This attitude should make progress possible in this key area. MAFF has already identified penalties as a priority in the simplification process and we recommend that the UK Government continue to push for improvements to the regime which make a sanction proportionate to the offence.

Environmental schemes

28. One success which has already been achieved in simplifying the IACS system concerns the "two metre rule" and the definition of field boundaries. Traditionally, the UK has allowed claims to be based on the actual area of a field rather than the cropped area within it. As a result of concerns expressed by EU auditors, MAFF announced last year that the maximum acceptable field margin width was to be two metres. This left farmers with a choice of cutting back hedgerows or reducing their claimed areas by up to five per cent.[82] Fortunately, the field margin issue was one of the first problems to be sorted out following the commitment by the Commission to give serious consideration to simplification and the UK's system of measurement has been accepted for the time being.[83] However, the dispute does raise some key questions about the direction of IACS. In the first place, MAFF described the episode as "an example of where we have to balance the need to comply strictly with scheme requirements and the needs of the industry."[84] Although welcoming the outcome, the industry would argue that their needs were not considered in the timing of the original announcement nor in the uncertainty it engendered.[85] Secondly, there is the far wider issue of how to integrate environmental considerations into the IACS system. This is going to become increasingly important with the introduction of cross-compliance (the discretion for Member States to attach environmental conditions to CAP direct payments to farmers). The conflict between strict application of the rules and environmental objectives in the two metre rule case has caused much concern to conservation bodies as to how the IACS system can adapt to these new considerations.[86] We recommend that MAFF press the Commission for clarification on how environmental measures are to be dealt with within the IACS system and ensure that environmental objectives are not undermined by IACS rules.

MAFF and the Commission

29. We have noted earlier the Commission's commitment to ensure that the principles of simplification are applied from the very first stage of developing regulations. It would be hugely beneficial if Member States also involved themselves in the process from this early stage. This is partly a general problem at the moment: the IACS Working Group tried to explore "whether there was sufficient discussion in advance of the implementation of regulations across the Union as to best practice and the most simplified way to apply regulations"; and reached the conclusion that there was insufficient debate on such issues.[87] However, there is also a particular UK dimension. Another working group, that led by Lord Haskins on Environmental Regulation and Farmers, argued that UK officials (and farming representatives) were less effective in entering such discussions with the Commission than those of some other Member States, and recommended their involvement in "earlier pre-proposal, more intensive and co-ordinated lobbying in Brussels ... to ensure that EC directives properly reflect the interests of British farmers and are practical and enforceable".[88]

30. MAFF officials accepted that in order to resolve the tension between the need for flexibility and the rigidity of the administrative structure, they "do have to try and stay very close to the auditors and stay very close to the people in Mr Slade's unit so we can have an on-going dialogue and resolve these problems before they become major issues".[89] We believe that there is scope for this dialogue to be developed to include proposals for new and existing measures and to share experience with other Member States. MAFF needs to be more proactive in its involvement with the Commission and its allies. The working group on simplification is an excellent start which looks likely to deliver real results for farmers, but we welcome the Government's commitments on influencing European policy made in response to the Haskins report and we expect these principles to be applied to the details of implementation as well as to the formulation of new regulations.


31. For too long the development of IACS has involved greater complexity but now at last there is a genuine opportunity for simplification. This has partly come about because of the increasing sophistication of technology which has brought in new reliable computer systems, permitting the sharing of information across schemes and the pooling of data from various sources. However, a second major impetus is clearly the attitude of the Member States towards simplification. There is general agreement that simplification is desirable, even if there are different priorities for immediate action.[90] MAFF officials believed that the Commission was "a little wary that we are trying to push them a little bit too far too fast."[91] We ourselves found that Mr Slade was at pains to stress that as far as he was concerned, the simpler the system, the better.[92] It will, of course, be essential to guarantee that the control functions protecting taxpayers' money from misuse are not undermined as the system is simplified, but in principle we support any attempts to make life simpler for farmers throughout the European Union.

46  Ev. p. 136. Back

47  Ev. p. 90. Back

48  Q 204. Back

49  Q 225. Back

50  Ev. pp. 45-46, para 32. Back

51  COM(2001) 48 final. Back

52  Q 225. Back

53  Q 228. Back

54  COM(2001) 48 final, Introduction. Back

55  IbidBack

56  IbidBack

57  COM(2001) 48 final, para 2.1. Back

58  Ibid, para 4.5. Back

59  Q 140. Back

60  Q 234. Back

61  Q 142. Back

62  Q 140. Back

63  Qq 220-221. Back

64  Q 220. Back

65  COM(2001) 48 final, para 3.4. Back

66  Ibid, para 3.1. Back

67  IbidBack

68  Q 231. Back

69  Qq 151, 230. Back

70  Q 109; COM(2000) 841 final, Proposal for a Council Regulation amending Regulation (EC) No. 1259/1999 establishing common rules for direct support schemes under the common agricultural policyBack

71  Q 108. Back

72  Q 231. Back

73  Q 191. Back

74  IACS Report, para 7.3.3. Back

75  Ev. p. 80, para 5. Back

76  Q 132. Back

77  Q 227. Back

78  Ev. p. 131. Back

79  Q 227. Back

80  Q 191. Back

81  IbidBack

82  Ev. p. 18, para 4.7; Ev. pp. 93-94, section 5. Back

83  Q 225. Back

84  Q 202. Back

85  Ev. p. 18, para 4.9.2. Back

86  Ev. pp. 84-85, appendix 3; Ev. pp. 93-94; Ev. p. 94, para 3.2. Back

87  Q 69. Back

88  Better Regulation Task Force, Environmental Regulations and Farmers, November 2000, Rec 1. Back

89  Q 204. Back

90  Q 226. Back

91  Q 226. Back

92  Q 144. Back

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